For 50 Years, Germany's Preeminent Sports-Car has Created Noble Speedsters Built for Style, Mystique and Performance

I'm in the passenger seat again. Only this time, I'm next to Heinz Bernhard, chief test driver for Porsche, as he puts a 911 Carrera through its paces on the company's test course in southern Germany. And this model has no magic speed-control button on the glove compartment. Bernhard has already driven me in a Boxster, the Carrera's younger sibling, over an obstacle course of cobblestones and potholes, hills and curves. That was fun, like a rollercoaster ride.

But a Carrera--this is more serious. It explodes with a violence unimaginable in a more conventional vehicle, hitting 60 mph from a standing start in 5.2 seconds. "You can tell the difference, yah?" asks Bernhard, needlessly. "Oooh, yah!" I mutter back, amazed I can sit and speak at the same time, as the speedometer jumps to triple digits. We approach a hairpin bend and Bernhard decelerates sharply. The Carrera takes the curve as if it were on rails.

All the time, Bernhard is jawing. "I started out as an engineer...kind of dull," he says, downshifting through several gears. For chrissakes, please no more talking. Just concentrate on those curves. Returning to the course's starting point, we come to a sudden, full stop. The brakes are amazing--no screech or slide, just the powerful tug of the seat belt against my shoulders and chest. Maybe it's what an F-16 pilot feels like pulling out of a dive.

"Bet you don't have a single boring day anymore," I say to Bernhard, as I emerge from the car trying to suavely disguise my relief at becoming landborne again. But the beads of sweat on my face and the wobble in my legs give me away. Bernhard and my guide from Porsche headquarters chuckle knowingly at each other.

I am in Germany because Porsche A.G. is commemorating its 50th anniversary as a sports car manufacturer. The occasion is somewhat marred by the death in March of Ferdinand "Ferry" Porsche at 88, who designed the company's first sports car. But Porsche A.G. has a lot to celebrate.

Just five years ago, the last time I visited Porsche headquarters in Zuffenhausen, a northern suburb of Stuttgart, the company was racking up record losses. The betting among industry analysts was that Porsche--like Jaguar, Ferrari and Lotus--would be bought out by a larger automaker looking to fill a luxury sports-car niche in its model line. The German newspapers abounded with articles on deep dissension, even scandalous quarrels, among Porsche family members, who own all of the company's voting shares. There was speculation about how long Wendelin Wiedeking, the bright young engineer brought in to run Porsche, would last: the company had spat out four chief executive officers in the previous dozen years.

But in the financial year that ended in July 1998, Porsche recorded net income of 139.4 million deutsche marks($80.6 million), compared to 48. 1 million DM in fiscal 1996. Although figures for 1998 will not be available until the end of the year, net income is expected to show another sharp rise, the fourth straight year that the company has been in the black. During the five years that Wiedeking has been at the helm, price per share has risen from 370 DM to 5,300 DM, a run-up unmatched in recent automotive history. The company is now worth more than $5.5 billion--the kind of fortune that can soften rancor even among the most dysfunctional relatives. "Today, you won't read in any newspaper about family frictions," says Wiedeking, a tall, blond 46-year-old who looks fitter and more relaxed than he did when he took over the company in 1993.

Most of what you do read in the media lately sounds as if it could have been written by the Porsche press department. The Boxster, the cheaper sports car model (cheaper by Porsche standards, that is, at a base price of $41,000), was introduced two years ago and is generally ranked by automotive journalists well ahead of its competition--the BMW Z3 roadster and the Mercedes-Benz SLK230 sports car. "The 'wow' factor was evident as soon as I took possession of the tested Boxster," gushed Michelle Krebs of The New York Times. The 911 Carrera (base price $65,030), draws the unabashed admiration of executives from other auto companies. "A pure, sculptured form," John E. Herlitz, Chrysler's vice president for product design, commented to The Times after looking over the 911 Carrera at the New York Auto Show this year. "There aren't any bad views of this car."

The reverence of experts is matched by the fervor of Porscheophiles--those rich enough to afford the cars and the many others who can only dream of buying one. Like pilgrims, they arrive in Zuffenhausen by the hundreds every day to visit the Porsche Museum. They include blue-collar apprentices from nearby towns in southern Germany who fantasize about jobs on Porsche assembly lines, junior executives and bank clerks with annual salaries smaller than the price tag on a Boxster, and retirees who think the sleek silhouette of the new Carrera has as much aesthetic appeal as any masterpiece in Stuttgart's modern art museum. They sit through videos of Porsche history, related by company executives and champion drivers to the accompaniment of Beethoven. And they purchase CD soundtracks of the whines and roars of winning Porsches on the straightways and curves of Le Mans, Monte Carlo, Monza and other grand prix courses.

But Porsche's history antedates its sports cars, and it hasn't always been so exalted. The company began with Ferry Porsche's father, also named Ferdinand. He was a struggling automotive engineer in the 1920s when he befriended Adolf Hitler, still a fringe politician, at a road race. After Hitler gained power, he was determined to demonstrate to the world the superiority of German cars. He remembered Ferdinand, and soon the fledgling Porsche engineering firm was getting design contracts with big German manufacturers. The Reich Chamber of Labor also commissioned Ferdinand to create a "people's car," the Volkswagen, thatthe working class could afford. Porsche and his son Ferry built a prototype in the garage of their house. But mass production had to be postponed because of the Second World War.

The war brought the Porsches lucrative contracts for designs of jeep-type vehicles, tanks, airplane engines, even parts for the V-1 flying bomb. In his autobiography, Ferry Porsche: Cars Are My Life, Ferry recalled his father's close personal relationship with Hitlerand his own warm feelings for the Führer during the war years. When Ferry's young son, Butzi, asked him why he was not in the army like all the other fathers, he responded, "Just imagine, if we were all soldiers, who would design and build the tanks and all the other weapons?" Although he spent the war as a civilian, Ferry was an honorary officer in the SS, an appointment made personally by SS Chief Heinrich Himmler.

After the Allied victory, the Porsches were fortunate to avoid prosecution as war criminals, a fate that befell other key German industrialists. However, the elderPorsche and his son-in-law, Anton Piëch, were jailed by the French occupation forces and held without trial for 17 months. According to Ferry, the French were attempting to force the Porsches to contribute their design and engineering talents to the car industry in France. Ferry claimed he had to pay a million franc bribe to French officials to get his father and brother-in-law released.

The Porsches' troubles continued when their contract to run Volkswagen was rescinded by the postwar West German government and Volkswagen was made independent. They were consoled somewhat by Anton Piëch's appointment as VW's first chairman.

With his father's health failing, Ferry took over the helm of Porsche. His plan was to have the company build its own cars. That was risky enough in the devastated early postwar economy. But Ferry seemed to be defying business sense by choosing a tiny, luxury niche in the automobile market--the sports car. The first motor vehicle to carry the Porsche label appeared in 1948. Called the 356 Roadster, it had an engine at mid-chassis to provide greater stability on sharp curves taken at high speed.

Ferry Porsche had great marketing instincts. He promoted his cars as powerful enough to win world-class races, yet tame enough to drive in a city. To build up Porsche's prestige, he hired German aristocrats to pilot his models in grand prix competition. They told their society friends how exciting a Porsche could be on the autobahn and even on ordinary streets.

Over the years, Porsche's blue-blood connections spread far beyond German borders. Prominent owners of the sports car have included King Juan Carlos of Spain, King Hussein of Jordan and King Carl Gustav of Sweden. But it was a tragic Hollywood prince who gave Porsche its mystique in the profitable American market. In 1955, the actor James Dean was killed when his Porsche Spyder 550 and another car crashed on a California highway, linking his name with the German sports car for eternity.

The success and prestige of his sports cars awakened in Ferry a desire to perpetuate a Porsche family dynasty. Ferry, who owned half of Porsche A.G., encouraged his sons to enter the business and groomed his eldest, Butzi, to take over. But Ferry's sister, Louise Piëch, who owned the other half of the company, had equally high aspirations for her son, Ferdinand. Nobody who met her doubted her iron will. "If I had a mother like Louise Piëch, I would have become chancellor of Germany," said Ernst Fuhrman, a former Porsche chief executive officer.

At first, the competition between the Porsche and Piëch children seemed healthy enough. Butzi Porsche and his cousin, Ferdinand Piëch, collaborated brilliantly to design the first 911 in 1963. The car went on to become the most acclaimed sports car in history, its originalsilhouette still recognizable 35 years later.

But eventually, the two cousins fought over who deserved most credit for the company's success. The quarreling spread to factory and sales policies, enveloping cousins and parents. The one thing Ferry and Louise were in accord about was that their children would tear the company apart. "After I ascertained that the necessary harmony and cooperation could not be created," Ferry wrote in his memoirs, "I drew the inevitable conclusion and said, 'Then nobody's going to be boss!'"

The younger generation of Porsches and Piëchs were permanently banned from management. Porsche was transformed into a publicly traded company. But all voting stock was kept in the family, divided equally between Porsches and Piëchs.

Feuding between the clan continued in the boardroom and soon became fodder for the media. When Porsche introduced its 928 model in 1977, Ferdinand Piëch badmouthed it to the magazine, Der Spiegel, and asserted it was overpriced. In 1991, when Ferry--despite Piëch resistance--backed the concept of an expensive, four-door Porsche sedan, drawings of the model were prematurely leaked to the trade magazines. After cries of heresy by automotive critics and many Porscheophiles ("A family car by the makers of the 911!"), the project was aborted.

The boardroom rivalries soon tumbled into the bedroom. Ferdinand Piëch had an affair with the wife of one of his cousins. The scandal grew when they lived together openly and had two children out of wedlock. It became a soap opera when Ferdinand married the kids' nanny.

Even if the family had managed to control their passions, Porsche A.G. would have found it difficult to maintain its superiority in the sports car world. The company reached its apex in 1986, when it sold 53,000 autos worldwide, including more than 30,000 in the United States. In part, this was the result of a very favorable exchange rate--almost three marks to a dollar--that made Porsche remarkably cheap, less than $20,000 for its lowest-priced model.

But then came the stock market crash of October 1987. In the next few years, Porsche sales tumbled, reaching a nadir in 1992-1993 when only 14,000 of its cars were bought, including an embarrassing 3,600 in the United States. Porsche managers reacted the same way they did to any glitch in the past. Emphasizing their cars' technological wizardry, they moved upmarket between 1989 and 1991, adding expensive improvements and accessories, discarding their cheapest models, and jacking up prices for other Porsches to between $45,000 and $100,000.

The strategy failed. Sports car enthusiasts, particularly those too young to have fallen under the sway of the Porsche mystique, figured that for considerably less money they could own a Japanese sports car of near-Porsche quality.

Wendelin Wiedeking faced steep odds when he was handed the reins of a very lame Porsche A.G. in 1993. Returning to the company after having cut his teeth there and then doing a short stint with an auto parts manufacturer, he spokeat the time of the need to massage Porsche egos by meeting with both sides of the family an equal number of times. "It's necessary to give them all an understanding of the actual situation so we can arrive at the right decisions for the company," he said then.

The actual situation was that major problems existed everywhere. "First, we had to redesign all our development, production and distribution systems," recalled Wiedeking recently. "And second, our car prices were too high." There would be no dividends for at least two years, Wiedeking informed the Porsche family. Meanwhile, Japanese consultants were hired to reorganize the factory floor and management structure of a company that for decades had been an icon of German industrial excellence. "Imagine, one day, strangers walk into a company like Porsche, take a stroll through the production plant, and tell you everything you are doing is pretty much off the mark," Wiedeking said at the time. "And they are not saying this in German or even English, but in Japanese. That's tough."

A visit to the Porsche factory five years later shows just how tough it was. The factory floor looks surprisingly less cluttered than it used to be. Assembly lines are shorter and simpler. Managers now talk of Japanese concepts like lean manufacturing, just-in-time manufacturing and zero-defect manufacturing. In practice, that means the labor force has been slashed, productivity has doubled and electronic monitors overhead let employees know how many more cars they must assemble to meet the target for their work shift.

With the Zuffenhausen plantrunning at full capacity, Porsche uses a service company in Finland to assemble part of its Boxster production. The underlying message to the trade unions is clear: if labor costs rise, Porsche--like Mercedes-Benz and BMW--is prepared to shift more production abroad. There are carrots as well. Bonuses are liberally handed out to workers who come up with money-saving suggestions in the assembly process. Top award--no real surprise, here--is the free use of a 911 Carrera for a year, with all maintenance and fuel bills footed by the company.

Wiedeking stresses that white-collar employees haven't had an easy time of it either during his tenure. "We cut management by 38 percent and have kept it that way," he says. "I fired 95 percent of our marketing and sales department."

Hans Riedel heads the reorganized marketing and sales department. He speaks English with a New Jersey vernacular picked up from several years handling BMW sales in that part of the world. "Our market studies in the early '90s showed that our public image was so poor that seeing someone drive around in a Porsche created what we call 'the asshole effect,'" says Riedel. Porsche owners were viewed as arrogant by other drivers, he explains. It had to do with gold chains hanging from their exposed chests, or a tendency to peel rubber as soon as the traffic light turned green.

"So, the major change we have been seeking is to create more social acceptance--to make sure our cars don't talk down to other people or make Porsche owners look superior," says Riedel. An ad campaign in magazines and on television got under way to gently poke fun at Porsches without damaging the cars' high-tech reputation. Porsche engineers, for example, are shown having the sports cars painted with colors that match their socks.

Riedel pulls out some graphs to show just how much Porsche's image has improved. In an early 1990s poll of 150,000 Europeans,two-thirds said they disliked Porsches. A similar poll last year found that more than half felt that Porsche had a good image.

To raise that percentage even higher, a new television commercial now being aired shows a Porsche being overtaken on a highway by a lesser vehicle. "The Porsche driver knows he has the engine power, but rather than use it, he just smiles and lets the other car speed by," explains Riedel. "The message: Don't make other people--those who can't afford a Porsche--feel badly."

Across the avenue from company headquarters, a dozen people who can afford Porsches are clustered in twos and threes, nervously sipping coffee in a reception room furnished with soft leather chairs and lush potted plants. Hailing from Germany and Europe, the United States and the Middle East, they have purchased 1998 models and are here to personally pick them up. They will spend a few days bonding with their new love objects on the nearby autobahn and alpine roads before shipping them back home. They have the look of anxious fathers outside a hospital delivery room. Some of them, though, have waited longer to have a Porsche than a baby. To foster feelings of paternity (or maternity), Porsche encourages prospective owners to choose from a bewildering array of accessories and options. "We gave one client a car with a gold-plated manual shift stick," says Jörg Austen, a retired development engineer who now leads factory tours. "Another wanted his car painted the exact color of his girlfriend's lipstick." Touches like these explain why the price of a customized 911 can soar above $100,000.